Slammed 48% Dekel Agri-Vision plc (LON:DKL) Screens Well Here But There Might Be A Catch

Dekel Agri-Vision plc (LON:DKL) shareholders that were waiting for something to happen have been dealt a blow with a 48% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 48% in that time.

In spite of the heavy fall in price, it's still not a stretch to say that Dekel Agri-Vision's price-to-sales (or "P/S") ratio of 0.1x right now seems quite "middle-of-the-road" compared to the Food industry in the United Kingdom, where the median P/S ratio is around 0.6x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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See our latest analysis for Dekel Agri-Vision

How Dekel Agri-Vision Has Been Performing

While the industry has experienced revenue growth lately, Dekel Agri-Vision's revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Dekel Agri-Vision.

What Are Revenue Growth Metrics Telling Us About The P/S?

Dekel Agri-Vision's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a frustrating 22% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 20% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 35% over the next year. With the industry only predicted to deliver 4.4%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Dekel Agri-Vision's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Dekel Agri-Vision's P/S

Dekel Agri-Vision's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Dekel Agri-Vision currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

It is also worth noting that we have found 2 warning signs for Dekel Agri-Vision (1 shouldn't be ignored!) that you need to take into consideration.

If these risks are making you reconsider your opinion on Dekel Agri-Vision, explore our interactive list of high quality stocks to get an idea of what else is out there.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.